Marketing ROI
Author : James D. Lenskold Summary : Six key reasons why marketers must make advancing
their marketing ROI capabilities a priority for 2003.
Article: There’s been a lot of talk about marketing ROI in recent years, but has there really
been any action? Data accessibility has increased and measurement processes have advanced,
but marketing organizations still need true financial accountability. And for what purpose? To
preserve creativity? To avoid threatening performance measures? Or just to keep number-
crunching out of their job description? If you are not aware already, take a closer look—marketing
ROI processes provide valuable insight into the strategic planning process and can actually
simplify the decision process while contributing to profit goals.
There’s never been a more urgent time to implement marketing ROI processes. Companies are
dependent on marketing organizations to win a greater share of profitable business in a very tight
competitive market. At the same time, marketing expenses are under scrutiny, and it’s important
to hold tight to the best investments while trimming only waste and low-performing investments.
Most marketers do work toward the objective of generating profits even if other metrics are used
to guide their decisions. Marketers must make advancing their marketing ROI capabilities a
priority for 2003 and here are six key reasons why.
1. Support creative thinking. As marketing strategies are being developed, ROI analysis shows
insight into the correlation between spending and results as well as investment limits per
customer value. This insight can break the traditional mindset to spur creative thinking and
market testing based on initiatives that require a broader range of marketing investments.
2. Compare diverse marketing opportunities. There are many tactical initiatives that can be
implemented toward the same business and sales goals, yet the value of each is not always
easy to compare. Marketing ROI analysis makes it possible to compare and prioritize initiatives
as diverse as growing the field sales force, increasing brand advertising or launching a new
loyalty program. It’s also the ideal approach for prioritizing the budget allocation between
acquisition, retention and cross-selling programs.
3. Improve campaign and customer profitability. Once marketers understand how to apply
the straightforward financial ROI equation to guide marketing investments, it’s easy to expand
the management of campaign profitability to include customer profitability. Managing customer
profitability has much more potential to show profit growth and foster integrated communications

The process for implementing marketing ROI must be very comprehensive to include all
investment components, estimate the incremental customer value generated just from that
investment, and calculate the ROI with consistency for a valid comparison to alternative
investment opportunities. It is also essential to break ROI down to the smallest decisions
possible, which in some cases will mean assessing the ROI of one incremental dollar spent. At
the campaign level, ROI processes can effectively guide target market selection and modeling,
offer development, channel mix and pricing.
Managing customer ROI helps maintain a focus on the best customers and keeps investments
into loyalty and CRM on track. An organization with solid ROI processes in place can shift from
the typically insane annual budgeting process into the dynamic management of a marketing
investment portfolio.
With marketing ROI, small changes can have big impacts in the bottom line. It’s been talked
about for many years now and even more so in the past year. Change like this requires the
“believers” out there to become true champions that will take action. Your parents may have told
you that money isn’t everythin, but in the business world, there’s no shame in competing for and
winning profits to the best of your ability.